Dec 24, 2012

Brunei - Brunei in the South China Sea hot seat

MANILA - Territorial
tensions in the South China Sea created unprecedented divisions within the
Association of Southeast Asian Nations (ASEAN) in 2012, with member states
taking divergent approaches to China's increasing assertiveness in the
contested maritime area.

Now, as the chairmanship of the 10-member grouping shifts from China ally
Cambodia to Brunei, also a claimant to South China Sea territory, in 2013, many
analysts wonder whether there will be a qualitative shift in ASEAN's stance on
the divisive but strategically important issue.

As China and Southeast Asian nations such as the Philippines and Vietnam have
pushed the frontiers of their claims in the Spratly and Paracel islands, ASEAN
has shown unprecedented disunity, raising doubts about the organization's
future ability to steer regional integration and manage complex
security-related conflicts.

While some analysts and ASEAN states have blamed Cambodia's apparent decision
to prioritize bilateral ties with China over ASEAN's multilateral interests,
others have accused the Philippines and Vietnam of purposefully antagonizing
China and drawing the United States into the situation.

Brunei, which is both a claimant in the ongoing South China Sea disputes and a
major Chinese energy partner, faces the dual challenge of managing territorial
tensions while reestablishing group unity as ASEAN moves towards forming a
single market and production base by 2015.

Whether the small oil-rich kingdom can disentangle the complex set of competing
country interests and put ASEAN back on a common track will be pivotal to
regional stability in the year ahead.

The South China Sea disputes date back to the Cold War era, when Vietnam and
China first squared off over contested features in the Paracel Islands. In the
immediate aftermath of the Cold War, the Philippines - after it evicted US
military bases in 1992 - lost the contested Mischief Reef in the Spratly
islands to Chinese aggression.

To prevent future conflicts, ASEAN and China agreed in 2002 to a non-binding
Declaration on the Conduct of Parties in the South China Sea (DoC), which
broadly called for a peaceful diplomatic resolution to the disputes. In 2006,
the three main protagonists - China, the Philippines and Vietnam - forged a
tripartite agreement on joint marine seismic undertaking, which provided a
basis for shared exploration, surveying, and potentially even the future
development of hydrocarbon resources around the Filipino island of Palawan in
the South China Sea.

In retrospect, this prolonged period of on-off engagement created a sense of
complacency among the claimant states and within ASEAN. While touting an
atmosphere of goodwill, amity and cooperation vis-a-vis China, ASEAN failed to
notice how the diplomatic niceties hinged on China's willingness to maintain a
moderate approach, consistent with its economic-oriented charm offensive
towards the region.

Recent experience has shown there were no group contingency plans in place to
deal with a more hawkish Chinese posture or provocative moves by member states
such as the Philippines and Vietnam. When tensions flared again in 2010, unlike
before, tough rhetoric from China was followed by aggressive military
posturing.

China, responding to a rising tide of popular nationalism and increasingly
influential hard-line factions within the ruling Communist Party, opted to up
the ante on the situation by harassing Filipino and Vietnamese vessels,
including oil and gas exploration rigs, in the contested areas.

In response, the Philippines and Vietnam looked to ASEAN and the US to help
contain China's rising assertiveness. When the US placed itself at the center
of the disputes by announcing its commitment to "freedom of
navigation" in the South China Sea during an ASEAN Regional Forum meeting
in Hanoi in 2010, a new layer of Sino-American rivalry emerged.

Over the next two years, under the chairmanship of Vietnam and Indonesia, ASEAN
pushed for a binding code of conduct (CoC) to settle the disputes and deter
further Chinese aggression.

However, that unified course shifted in 2012 under Cambodia's chairmanship,
with ASEAN members failing to agree even to discuss the disputes or to make
mention of them in a joint communique after the ASEAN Ministerial Meeting in
Phnom Penh in July. It represented the first time the grouping failed to issue
a joint statement after such a high-level meeting.

Cambodia's chairmanship underlined two important points: (a) the perils to
group unity of weaker member states with considerable ties to China assuming
the organization's leadership; and (b) the impact of the presiding chairman on
the entire organization's performance, especially over contentious territorial
issues that require unanimity in action and strategic vision.

Diplomatic test

Similar to Cambodia, but unlike Indonesia,
Brunei is neither a major nor an original member of ASEAN (it joined in 1984,
17 years after the organization was founded by Indonesia, Malaysia, the
Philippines, Singapore, and Thailand). As such, there are already concerns
among certain member states about Brunei's diplomatic maturity, capability, and
commitment to the organization and its ability to effectively handle the
ongoing and intensifying disputes.

When ASEAN fell into disarray after the fiasco in Phnom Penh, influential and
older group members such as Singapore, Malaysia, Thailand and Indonesia played
a crucial role in salvaging the organization from diplomatic implosion. In
particular, Indonesia's proactive mediation efforts, including shuttle diplomacy
between rival states, resulted in "Six-Point Principles" which called
for (i) a peaceful, diplomatic resolution of the disputes in accordance to
prior agreed upon principles and (ii) the development of a regional code of
conduct for the South China Sea.

Like Cambodia, Brunei has considerable economic ties to China. While Beijing
has leveraged multi-billion dollar concessional loans, investments, and grants
to woo comparatively poor Cambodia, it has also become increasingly involved in
Brunei's crucial oil and gas sector. Brunei is heavily dependent on its
soon-to-be-depleted hydrocarbon resources, which currently account for around
60% of gross domestic product (GDP) and 90% of total export earnings. [1]

In the absence of strong democratic institutions, Brunei's ruling royal family
depends heavily on hydrocarbon earnings to prop up its security apparatus and
appease the population through generous welfare and subsidy schemes. China is
thus not only a major customer and source of advanced offshore-drilling
technology, but also a means as Brunei's second-largest market for Brunei to
diversify its highly hydrocarbon-dependent economy.

That diversification has been seen in fast growing bilateral trade. From 2001
to 2011, two-way trade between China and Brunei ballooned from a meager US$100
million to $1.3 billion, surpassing the two sides earlier stated $1 billion
target. Brunei has recently exported between 13,000 to 20,000 barrels of oil
per day to China, accounting for as much as one-eighth of its total crude
exports. [2] [3] [4]

Meanwhile, Chinese energy companies, ranging from the Zhejiang Henyi Group and
Sinopec Engineering Inc to the Chinese National Offshore Oil Corp (CNOOC), are
involved in large-scale multi-billion dollar downstream, refinery, and
exploration projects in Brunei. [5] Small and medium-sized enterprises in
Brunei have also ventured into China, bidding to tap into larger market
possibilities.

Chinese Premier Wen Jiabao paid an official visit to the country last year,
while President Hu Jintao met Brunei's Sultan Hassanal Bolkiah on the sidelines
of the 2012 Asia-Pacific Economic Co-operation Summit, underscoring the growing
importance of bilateral relations.

Those growing links explain why certain ASEAN states, including the Philippines,
are concerned about Brunei's ability and willingness to transcend its growing
economic interdependence with China to perform a more decisive regional role as
ASEAN's new chairman.

Given Brunei's generally low-key foreign policy, where it has consistently
avoided controversy by maintaining neutrality in regional affairs, many ASEAN
states are keen to see the country live up to the challenges of serving as
chairman amid the rising tensions.

Unlike Cambodia, Brunei is a direct party to the ongoing territorial disputes
through its overlapping exclusive economic zone (EEZ) with other littoral
states. After Cambodia handed the rotational chairmanship to Brunei last
November, certain regional states are known to have prodded the small kingdom
to play a more constructive role than Cambodia.

"Brunei's chairmanship will lead to 2015, so there is plenty of interest
on our part to make sure that there is a continuation of agenda in the progress
of ASEAN achievement. We have confidence in Brunei's chairmanship," said
Teuku Faizasyah, spokesperson for Indonesian President Susilo Bambang
Yudhoyono.

In late November, just after the ASEAN Summit, Vietnamese President Troung Tan
Sang visited Brunei to sign agreements in the areas of commerce, industry and
energy. Crucially, they affirmed their commitment to the 2002 DoC and the
development of a regional CoC, as reiterated by the Indonesia-sponsored
"Six-Point Principles" on the South China Sea.

With Vietnam's former Deputy Foreign Minister Le Luong Minh set to become
ASEAN's secretary general for the next five years, there will likely be more
pressure from the top of the organization to forge a multilateral front to
guard against rising Chinese assertiveness.

For Southeast Asian claimant states, there are certain reasons for optimism. As
the world's fifth-richest country measured by per capita gross domestic product
at purchasing power parity, Brunei is not as dependent on Chinese aid or
investments as comparatively poor Cambodia. The ruling monarchy is also believed
to be keen to use the status of the chairmanship to raise the country's
profile, meaning it will likely emphasize conflict management and the need for
freedom of navigation in the disputed waters.

Since its traditional hydrocarbon resources are now heavily depleted, Brunei
also has a long-term interest in developing offshore oil and gas fields, both
within the country's territorial waters as well as within its contested EEZ.
Neither an armed conflict over the contested areas nor a move towards total
Chinese domination is in Brunei's national interest. Whether it can avoid
either scenario will determine the failure or success of its chairmanship.

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